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FASAB: Changes Would Fix Confusion Over "Earmarking"

The
Federal Accounting Standards Advisory Board (FASAB) issued a
proposal Wednesday that would modify the definition of earmarked
funds in Statement of Federal Financial Accounting Standards (SFFAS)
no. 27. One key amendment in the exposure
draft would change the term
“earmarked funds” to “funds from dedicated collections.”

The
ED, Revisions to Identifying and Reporting Earmarked
Funds: Amending Statement of Federal Financial Accounting
Standards 27, would clarify that (1) at least one source of
funds external to the federal government must exist for a fund to
qualify as earmarked, and (2) a specific exclusion is proposed for
any funds that are established to account for pensions, other
retirement benefits, and other post-employment or other benefits
provided for federal employees (civilian and military).

The
ED says that the term “earmarked funds” has become confusing to
readers because of the increased focus on a similar term,
“earmarking,” which refers to earmarked spending. Earmarking occurs
when legislation designates appropriations for a specific purpose.
In contrast, the reporting requirements of SFFAS no. 27 are focused
on collections that are distinct from the government’s general
revenues and are dedicated for a specific purpose. The ED says the
proposed new term “funds from dedicated collections” is a unique and
descriptive term that will not be confused with other commonly used terms.

The
proposal would give component entities the option to continue using
the existing format of separate lines or columns to display
information on earmarked funds on the face of the balance sheet and
statement of changes in net position, or to use an alternative
format. In addition, component entities would be permitted to report
either consolidated or combined information and would be required to
label the information accordingly.

The
board also proposes explicitly requiring that component entities
report information in sufficient detail to support governmentwide
reporting requirements.